]]>IBM is a big backer of the OpenPOWER open-source hardware project. And it’s the company behind the SoftLayer cloud, so it was only a matter of time before it put the two together by offering SoftLayer bare-metal servers on OpenPOWER-based hardware.

The new service will come online in the second quarter, when pricing details will be made available.

Big Blue launched the OpenPOWER alliance in August 2013 to breathe new life into its POWER8 chip franchise. At that time the only vendor relying on those chips was, um, IBM.

The company managed to line up some big names, including Google, to back this effort. A Google spokeswoman at the time said that OpenPOWER hardware could become an option for use in Google data centers. Nvidia, Tyan and Mellanox also backed the OpenPOWER play.

In October, IBM rolled out a new server built on the POWER8 processor and Nvidia’s GPU accelerator.

While most cloud workloads rely heavily on virtualization to pack more jobs onto less hardware, bare metal servers offer great raw performance (without the virtualization tax). Because the entire computing resource is dedicated to that job, performance can be excellent but the deployment model can be less flexible than virtualized workloads. IBM SoftLayer has offered bare metal capabilities for some time, and last year started offering that option for by the hour.

IBM’s OpenPOWER move comes at a time when name-brand (pricey) servers from IBM, HP and Oracle are under attack by low-cost white-box providers. Big web scale companies like Facebook and Google do not buy these branded boxes, instead opting to hire contract providers to build servers to their specs. OpenPOWER is an effort to counter that trend.

Cloud credits are ubiquitous — Y Combinator has special hosting offers from Amazon, Google, Rackspace and now Microsoft, according to Y Combinator president Sam Altman. But, $500K is a big number. (Oh, and the startups will also get three years of Office 365 subscription, “access to Microsoft developer staff,” plus a year of CloudFlare and DataStax services.

Qualified startups can typically get $1,000 to $15,000 in Amazon Web Services (AWS) credits, and there are other freebies available. Then, in September, things started going a bit haywire. Google started offering $100,000 in Google Cloud Platform credits to qualified startups. Two months later IBM upped the ante to $120,000 in credit for SoftLayer infrastructure or BlueMix PaaS. Again all for “qualified” startups.

This is a strategic gambit for Microsoft, which wants to get more young companies — many of which are probably not Windows focused — to check out Azure. It’s also a way to chip away at Amazon Web Services’ prodigious lead among startups. AWS is pretty much the default cloud selection for young companies.

This story was updated at 5:24 a.m. PST February 11 to reflect that AWS typically provides qualified startups with up to $15K in promotional funding.

As for the round of layoffs that did kick off, IBM wasn’t officially forthcoming about the number. One insider who requested anonymity said a “few thousand” workers were affected, with costs covered by a previously announced $600 million restructuring charge. And, The Alliance@IBM, a union-affiliated advocacy group for IBM workers, put the tally at 5,000 as of late last week. In a January 26 research note, Sanford Bernstein analyst Toni Sacconaghi estimated that the $600 million charge would cover a layoff of about 8,000 people. That’s not nothing, but it’s also not anywhere near 26 percent of IBM’s workforce.

On the bright side, IBM last week said it won a big cloud computing deal with Marriott International. Details were scant but a spokesman said this is a three-year contract on which major rivals, including Amazon Web Services (AWS), Microsoft and Oracle also bid. (I’ve asked those three companies for comment and will update this post as needed.) Update: Oracle and Microsoft declined to comment.

Here’s the thing about IBM: It competes with an array of competitors including old IT adversaries like HP, Oracle and Microsoft but more importantly it faces AWS, which has set its sights on the sorts of enterprise workloads that are IBM’s bread and butter. And AWS is not used to the sorts of enterprise margins once enjoyed by IBM (although I would note that people who think AWS is unprofitable are mistaken.)

But, what’s particularly concerning to some IBM watchers (raising hand here) is that the company is known for buying its way into new businesses, as it did with SoftLayer two years ago, then slowly sucking the new company into the overall IBM borg. Sometimes that works fine. But my feeling all along vis-a-vis SoftLayer was that IBM needed the smaller company’s nimbler startup mentality and non-IBM worldview almost as much as it needed its technology.

IBM is a big, important company, but its ability to turn out innovative stuff has been constrained by a hairball of legacy technologies. The question now is whether it will take what is good about SoftLayer and infuse that into the rest of the IBM cloud (one hopes!) or muddies what is great about SoftLayer. And, to IBM’s point, we are still early in the cloud adoption cycle and the stakes are huge.

So even though it’s normal for startup execs to fly the coop within a year or so of selling their baby to a big company, it is still concerning that a chunk of the SoftLayer brain trust has already left the building — co-founder and Chief Scientist Nathan Day left IBM/SoftLayer last April, for example. Former CTO Duke Skarda apparently left late last year although his LinkedIN profile is ambiguous. And co-founder and former CEO Lance Crosby left recently; Crosby was expected to stay until at least July, which will be the second anniversary of the acquisition closing. Those who hoped for a shake up to the IBM way wanted to see a SoftLayer person — or perhaps some other relative newcomer — lead the cloud charge. That is not going to happen.

VMware’s Bill Fathers: Businesses want a business-focused cloud

When it comes to enterprise workloads, another company IBM competes with is VMware. On this week’s Structure Show, VMware’s cloud EVP and GM Bill Fathers didn’t pull any punches. In a world where many people equate cloud computing with AWS, Fathers is an unrepentant critic, saying that big companies are not convinced that they can run hybrid clouds in conjunction with AWS. He cites Harley Davidson as an example of a customer which tried to go with AWS for a new application and ended up coming to VMware.

Harley Davidson created a front-end iPad app for its CRM systems so dealers could check inventories. “They tried to do it on Amazon but physically could not connect it to their existing Oracle database of record from a networking perspective and they gave up,” Fathers said. “We used NSX [VMware network virtualization] to craft a connection from their on premises environment to vCloud Air and integrated it back to applications living on premises.”

Then the money quote aka fighting words:

“I am not spending a second working out how you solve what I think is an unsolvable problem of a client who’s marooned an application in AWS and is desperately trying to get it connected securely back to an on-premises app.”

(Send cards and letters to VMware please, but also feel free comment below.)

]]>IBM has pledged to deliver a $7 billion cloud business by 2015 for a couple of years — and now, according to its own numbers, it’s achieved that goal. On its fourth quarter 2014 earnings call, IBM CFO Martin Schroeter said — a couple of times actually — that this key strategic business grew 60 percent last year to hit that $7 billion goal.

But, that number is hazy. It is unclear how much of that business comes from older outsourcing deals that are being reconstituted as cloud business. On the other hand, nearly every vendor trots out nebulous numbers when it comes to cloud. As has been reported ad nauseam, Amazon doesn’t break out the size of its AWS cloud business. There’s also been controversy over Microsoft’s cloud claims.

Having said that, a claim by one IBM insider that this $7 billion figure makes IBM the world’s largest cloud provider has to be taken with a big grain of salt. Over the past four quarters, the same category in which AWS resides logged $4.8 billion in sales, and I have to say the idea that IBM has a bigger cloud business than AWS begs disbelief probably everywhere except in IBM’s Armonk, New York headquarters.

Overall, IBM logged fourth-quarter earnings of $5.81 per share, down 11 percent from $6.13 for the year-ago period. Net income was off 13 percent to $24.11 billion from $27.70 billion for the same period. IBM shares, which initially soared to nearly $163 on the earnings news, then swooned as people dug through the numbers and IBM provided a disappointing outlook.

But Schroeter noted that IBM is doing well in strategic “high value” segments: cloud, big data, social media and mobile.

IBM logged $25 billion in revenue from those combined segments, which he said now accounts for 27 percent of IBM’s total business. And, he noted that IBM’s “as a service” business (meaning IaaS, Paas and SaaS etc) is now purring along at a $3.5 billion run rate up from $2.2 billion last year.

In that segment its OpenStack-based Bluemix PaaS and SoftLayer cloud infrastructure businesses are key.

This story of doing well in high-value segments echoed what SAP CEO Bill McDermott, said earlier Tuesday: that SAP’s core (legacy) business is growing but that cloud is growing faster. The question for both these companies is whether growth in new businesses can make up for the dwindling of their bread-and-butter legacy stuff.

Speaking of SoftLayer, Lance Crosby, who retained his CEO title when SoftLayer was acquired by IBM two years ago for $2.2 billion, is now general manager of cloud innovation and business development at IBM. Meanwhile Robert LeBlanc, who joined IBM in 1981, is now the official cloud guy, aka SVP of Cloud — so those hoping for an outsider perspective to guide IBM’s cloud may be disappointed.

IBM is adding 8 new data center locations via a partnership with Equinix. Those locations come in addition to three new data centers in Germany — a particular focus for all the cloud powers — Japan and Mexico City. The latter three data centers, now online, are part of a $1.2 billion investment announced early last year.

IBM sees more enterprise accounts — many of which already deploy private clouds “behind their four walls” — looking at off-premises clouds, said Angel Diaz, VP of open standards.

“That might be a dedicated zone of a public cloud or a public cloud, but the magic, sweet spot is hybrid, which connects those two worlds [private and public clouds] together,” he added.

IBM will not have that sweet spot to itself. A dozen or more competitors including traditional rival Hewlett-Packard and sometimes-ally Red Hat are also gunning for that market. Then there’s VMware and Microsoft. And Amazon Web Services, which used to sort of pooh-pooh the need for private cloud, has changed its messaging and introduced products to facilitate hybrid cloud set-up. And all of these vendors are adding data centers and cloud capabilities around the world.

]]>IBM is moving as fast as it can into cloud computing, wooing startups from Silicon Valley to London in hopes that young born-to-cloud companies will use its technology as opposed to, say, the stuff from Amazon Web Services.

The previous week, IBM said qualifying startups could get up to $120,000 in credits towards the use of IBM SoftLayer, BlueMix PaaS and associated products. That’s $20,000 more than Google has put up; and significantly more than the $25,000 in credits AWS typically provides.

Facing a gigantic competitor

But then again, IBM has to offer more. It still lacks the mind share and market share of leader AWS. All of this is a good start towards winning startups over, but nowhere near enough.

I would estimate that north of 90 percent of startups default to Amazon Web Services use; some are willing to kick the tires of Google Cloud Platform and if the startup’s brain trust comes out of the Microsoft ecosystem, Azure might get a look.

The CTO of a San Francisco area startup who has been quite critical of AWS policies — he’s really irked that AWS execs keep telling his venture backers that his company should use more and more AWS services — said there’s still really no viable option for companies like his. In his view, these small companies, are putting more — not fewer — workloads into AWS, although he remains intrigued by Google’s sustained use discounts, which make using its resources much easier to manage than AWS.

Can enterprise kingpin appeal to the little guys?

Here’s IBM’s blessing and curse: It is in virtually every enterprise account in the universe in some form — so those companies will likely at least give SoftLayer/BlueMix a look. But even those companies have developers enamored of AWS and many of those new corporate applications are being tested there by default. That gives Amazon a powerful foothold in those IBM shops.

Jose de Castro, founder and CTO of communications startup Tropo, is a big fan of SoftLayer — in fact he was scoping it out before IBM bought the company last year for $2 billion. The acquisition actually worried him but he forged ahead and said IBM has done a great job keeping SoftLayer SoftLayer. He was particularly attracted to SoftLayer’s bare-metal resources.

SoftLayer offers virtualized servers for web functions and databases but also bare metal as a service which is great for video processing and games, he noted.

De Castro said Amazon’s just announced C4 instances are optimized for video and other graphics intensive workloads, but Tropo is already well down the road. And it also uses AWS for other parts of its business.

This is sort of an unusual case study for an IBM Cloud customer, most of which appear to have come to IBM’s pre- or post-Softlayer cloud portfolio because they have a prior relationship with IBM.

Here’s what I would worry about as a startup evaluating IBM: SoftLayer is great as long as its management — IBM cloud chief and former SoftLayer CEO Lance Crosby et al — are still steering the ship. And provided they have the full commitment of IBM CEO Ginni Rometty.

Given how important cloud is to IBM I would assume that group — as opposed to IBM’s old guard — will get what it needs. But how long will those people — who are accustomed to the fast pace of cloud — be willing to stick around IBM, which is, for all of the best intentions, still too big to be really nimble?

Constellation Research analyst Holger Mueller is bullish on BlueMix, which he characterized as a “genuine PaaS — OEM’d Cloud Foundry” integrated with other IBM products and running on SoftLayer. “There is a huge SoftLayer startup system and IBM is loving on it,” he said via email. And, “free cloud is always a good [incentive] for startups,” he said.

Carl Brooks, analyst with the 451 Group, also sees reason for optimism. “It’s pretty standard [for companies] to go with SoftLayer after they cut their teeth on AWS as startups — but also still use AWS,” he said via email.

“It’s also worth noting that IBM rolled out BlueMix in well under a year which is Warp Factor Eleventy Jillion for IBM. That says more to me about how much IBM is trying to change than anything else, to be honest,” Brooks added.

Still, Amazon with an 8-year head start in public cloud, shows no sign of slowing down and Google and Microsoft — both of which with money to burn — show a willingness to burn it on their clouds. It’s unclear if IBM has that luxury.

For more on IBM’s cloud picture, check out Lance Crosby’s talk at Structure 2014.

[youtube https://www.youtube.com/watch?v=D2LZz7dPBDA]

This story was updated at 5:25 a.m. PST on November 24 with mention of IBM’s new dedicated BlueMix Option.

]]>The great race by U.S. cloud companies to capture part of the huge Chinese market continued with Friday’s news that IBM is working with Tencent Cloud to provide cloud infrastructure and software-as-a-service capabilities for business in China. IBM SoftLayer opened a data center in Hong Kong in June.

This news revolves around IBM using Tencent cloud to provide business services; it does not at least yet involve IBM’s SoftLayer cloud arm, a spokesman said.

IBM and Tencent, the company behind the popular WeChat mobile messaging app, signed a Memo of Understanding (MOU) to this effect. To participate in the Chinese market, U.S. companies have to partner with local vendors. Microsoft was the first provider down the chute. Azure went online in China in March via Microsoft’s collaboration with Via21net. Amazon is working with China Net Center and SINNET to set up its new Beijing region slated to go live this year. (The AWS site lists the region as “coming soon.” An AWS Re:Invent announcement, perhaps?)

Some companies are running China operations out of Hong Kong or Singapore, but as Catchpoint Systems’ CEO Mehdi Daoudi pointed out recently, latency and other issues mean that if you’re serious about doing cloud in mainland China, you need presence in mainland China.

]]>With a couple days worth of cloud restarts in the rear window, two of the biggest cloud providers are ready to talk about them — a bit.

To recap, last Wednesday night, Amazon started notifying customers of a reboot needed on some of its instances to start Friday. On Friday night, Rackspace followed suit, telling customers of a re-do to start Sunday. Details were scarce but it was pretty quickly established that an unspecified vulnerability in the Xen hypervisor was the issue. Both companies use versions of Xen in their public cloud infrastructure.

Rackspace CEO Taylor Rhodes (pictured above) apologized to Rackspace customers for problems they had. Give him credit, he didn’t do the qualified sorry-if-we-inconvenienced-you thing — he outright apologized for “the downtime and inconvenience that you and others of our customers have suffered in recent days.”

Per his blog post:

This maintenance affected nearly a quarter of our 200,000-plus customers, and in the course of it, we dropped a few balls. Some of our reboots, for example, took much longer than they should. And some of our notifications were not as clear as they should have been. We are making changes to address those mistakes. And we welcome your feedback on how we can better serve you.

And Amazon Web Services evangelist Jeff Barr advised customers how they can better weather similar issues in the future. It was the usual litany: Put instances in two or more Availability Zones. Keep an eye on your AWS console and make sure to list alternate contacts in case primary people are out. Use Trusted Advisor assessments. Open up AWS Premium Support cases to get engineering assistance. Use Chaos Monkey to test various kinds of failures in a controlled (e.g. safe) environment. Oh, and use more AWS services, including Auto Scaling, to keep a set number of healthy instances running.

Both AWS and Rackspace said they were bound by Xen security practice, which mandates that vendors report security issues to the committee first so members can work to patch problems. Per the Xen support site post:

If a vulnerability is not already public, we would like to notify significant distributors and operators of Xen so that they can prepare patched software in advance. This will help minimise the degree to which there are Xen users who are vulnerable but can’t get patches …

Naturally, if a vulnerability is being exploited in the wild we will make immediately public release of the advisory and patch(es) and expect others to do likewise.

]]>That Xen hypervisor vulnerability is sparking another reboot — this time of IBM Softlayer’s cloud. Users got a notice from SoftLayer early Wednesday morning, 12 hours in advance of a restart to come at 10 AM CT. The message header was “VSI Hypervisor Upgrade and Reboot – All Locations.”

In its email to customers, Softlayer said the issue lies in “some of our hypervisor nodes which are used to provide Virtual Server Instances (VSIs) and [we] have determined that some of them will require reboots and upgrades to remediate against the potential security vulnerability.”

At least one customer feels that 12 hours’ notice for something that was known to the vendor much earlier is insufficient. While AWS and Rackspace public clouds rely on Xen, customized for their purposes, SoftLayer uses a variety of hypervisors, including Xen. IBM posted this update Wednesday afternoon. IBM was added to the Xen.org predisclosure list September 29, while AWS and Rackpace were already on it.

Security vulnerabilities pose a quandary for IT vendors. These suppliers need to be as transparent as possible with customers about patches and upgrades, without revealing too much about the underlying security issue, something Rackspace CEO Taylor Rhodes noted that in an apology posted Wednesday. But smart cloud users should probably double check that predisclosure list for their vendor’s name and if that vendor has not already issued an alert/reboot, get on the phone to see what’s up.

Note: This story was updated at 11:55 a.m. PST to add a link to IBM’s post about the reboots and again at 6:08 a.m. October 3 to show IBM was added to the Xen.org predisclosure list on September 29.

On Tuesday, UBS analyst Steve Milunovich said these long-term projections are not worth doing in this era of tech realignment and that IBM needs to focus on long-term strategy instead of EPS goals. IBM’s trailing twelve month EPS is $14.85, so it has a tough row to hoe between now and the end of its fiscal 2015, which would be Dec. 31, 2016.

“We advocate guidance that does not target a long-term EPS number,” Milunovich wrote in a research note released Tuesday morning.

He added:

We think IBM should (1) give annual and perhaps next quarter earnings and cash flow guidance but not beyond; (2) build on the analyst meeting by providing consistent metrics round three segments: strategic imperatives, recurring core franchises, and transacaitonal businesses; (3) provide more detail on the overall financial impact of cloud and Big Data on financials.

IBM should also think about using its cash to pay dividends rather than share buybacks and (shock) emphasize long-term principals–“margin over revenue” — he noted.

For the record, Milunovich himself thinks IBM will hit the target, but the question is what it has to do to make that happen. If it makes the number but only because of low tax rates and layoffs etc., what does it really mean?